Highcroft Investments Share Discussion Threads

[kenny] 12/2/2019 16:25

Surprised I was able to get those three lots today. Tried to buy an initial 2k yesterday with no luck. I understand, normally, the ability to deal in volume here is restricted. Is that what long term holders have found?

[skyship] 12/2/2019 14:29

Hmm - good, a little bit of volume. 4500 bought in 3 deals @ 900p.

[skyship] 09/2/2019 07:12

"UK property sector was currently under a Brexit shadow" - yes, agreed, in the very short-term property investors are sitting on their hands, activity levels are certainly dropping, but not valuations. Over the medium-term, once we have some direction, IMO that pent-up cash should again stimulate the sector.

[spangle93] 08/2/2019 17:32

Skyship - you're absolutely right - consequently the speculative O&G element is probably well under 10% of the portfolio, and becomes miniscule if you add in the managed personal pension to the overall pot consideration. However, it's my background, so I understand the risks better, even if that doesn't equate to making shedloads, and I learn a lot through this that makes me a better professional.

So I appreciate your education in the property area.

I can acknowledge that retail and warehousing are different, e.g. I imagine that Amazon distribution would be classed as retail warehousing but they don't have a physical retail presence on shopping centres. However, I think they can't be totally disconnected.

Interesting, I thought the whole UK property sector was currently under a Brexit shadow, where the world ends on March 29th, darkness covers the land, and UK business expires before April 1....

[skyship] 08/2/2019 14:42

Spangle - the speculative world of small AIM-listed Oilers & miners couldn't be further removed from the mathematical world of commercial real estate.

I do occasionally trade that heady world, indeed the Spec of the Year on my JDT thread (BMV) is a very small miner showing a very welcome 50% gain YTD!

But those punts are small allocation plays, compared with serious investments into property.

Dealing with yr comments in turn:

# Price drift: The wider Market really has very little knowledge of HCFT; and of course it is too small for institutional interest. Still, a few investors will learn about these at around the time of the Interim & Final statements. The next key date will be the Finals in c6weeks time - 23rd March last year

# IMO unaffected by Brexit

# Do not confuse Retail with Warehouse Retail - in this respect here is a relevant para from the last EPIC Finals:

"In 2018 the retail sector has come under increasing pressure following a number of tenant administrations and Company Voluntary Arrangements (CVAs). The high street and shopping centre markets have been hit the hardest but there has also been an adverse effect on the retail warehouse sector. However, the Company's portfolio has been relatively resilient as rents are generally affordable, the properties are well-located and, as a consequence, tenants are trading well. The proactive nature and expertise of the Investment Manager has meant that it has often been possible to attract new tenants relatively quickly when voids have occurred."

As I believe I posted earlier, HCFT has only one tenant affected by retail slump - a Carpetright store on their Wisbech property.

# ...if Kingerlee decides strategically to reduce its stake." Such a move would of course be highly beneficial to HCFT shareholders. In a case like this the controlling shareholder would have to seek a buyer for the company overall. With the prime portfolio and clean structure they would be looking for a price close to NAV - currently c1200p/share! Now that would be nice...

[skyship] 04/2/2019 13:34

This was stated in the Interims last August:

"Our portfolio has been affected by only one CVA, where the tenant remains in occupation and the rent on that property has been reduced by GBP20,000pa (0.4% of gross rental income) whilst the lease term is unchanged."

This of course referred to the Carpetright store in Wisbech.

Other than that the portfolio sectorally seems very well positioned; and in the March Finals I would expect further NAV growth to Dec'18. For my model I assume 1200p, a small 1.1% increase from the Jun'18 figure of 1187p. I also see no reason why the Final dividend shouldn't be given a good hike as the Interim dividend was raised by 15.4%. An overall 53p would be achieved by a 14.2% increase to the Final.

On those estimates 880p would provide a discount of 26.7% and a yield of 6.0%

[topvest] 03/12/2018 21:19

Yes, good news. Happy to hold.

[skyship] 03/12/2018 18:12

"sale proceeds that were GBP945,000 (34.6%) in excess of the June 2018 valuation"

34.6% in excess of valuation!

Of course that uplift will surely be exceptional; however it is a very clear indication of a conservative valuation policy.

Great news.

[stemis] 03/12/2018 17:14

Adds 18p to NAV. Decent business

[semper vigilans] 03/12/2018 16:38

Decent sale and uplift on recent book value.

[skyship] 10/10/2018 14:09

Posted in no.144 above:

"Missed that £4.9m purchase of the Nuffield Health Fitness & Wellbeing Gym in the Broadway Plaza, Birmingham. 7% yield. Doesn't exactly shoot the lights out though, as what chance of asset management gains. Maybe we'll hear more in the Interim Statement."

We didn't hear any further justification on a fairly poor acquisition in my view. This was all they had to say:

" After the period end we reinvested the total proceeds of GBP2,475,000, together with the proceeds of additional disposals of our equity investments, into the freehold of a health and fitness club in Birmingham for a net initial yield of 7.0%. "

[crumppot] 10/10/2018 09:48

Skyship I agree with you. HCFT has a good portfolio. What was wrong with their last acquisition?

[skyship] 10/10/2018 09:44

SteMis - ~"Alternatively there is a surplus of properties and rents (and valuations) will remain depressed."...…;….?

Not sure what the point of that post really was.

The Market is tight and tightening in the regions. There is certainly no surplus; hence rents and valuations are rising.

My point about replacement costs applies just as much to HCFT; and as Semper states, HCFT does have an excellent portfolio, though as I stated earlier, not exactly enamoured with their last acquisition.

So Stemis, what was the point you were trying to make?

[semper vigilans] 10/10/2018 09:18

Highcroft’s portfolio is pretty solid - it would be extremely difficult to assemble it from a standing start. Hence at some stage, will someone come knocking?

[stemis] 10/10/2018 09:13

Alternatively there is a surplus of properties and rents (and valuations) will remain depressed. I think HCFT has a nice portfolio (I've no idea about RGL) but there's a lot of dross out there...

[skyship] 09/10/2018 12:37

Having top-sliced a few post the XD date, bought back yesterday @ 920p & today @ 910p. Look very good value again.

Re valuations in the regions, IMO very interesting to look at replacement costs, something both RGL & WHR have talked about recently.

Take a look at the Edison interview I refer to in this post on the RGL thread.

===============================================

I was replaying that Edison TV interview today (see Header) so as to write down the best stat not usually covered; and I believe not mentioned before on this thread:

# RGL's office valuations are based upon £130/sq.ft VERSUS a replacement cost averaging £200/sq.ft

# RGL's industrial valuations are based upon £42.75/sq.ft VERSUS a replacement cost averaging £85/sq.ft

This explains the lack of development in these sectors in the regions. The existing properties are too lowly valued by the open market. So with very little new stock being built, rents for existing properties might be expected to remain keen; and therefore valuations continue to rise.

The stats are pretty incontrovertible, but it is the degree of the difference which certainly surprises me!
===============================================

[crumppot] 10/8/2018 15:02

REITs have to pay out at least 90% of the their profits.

[alanji] 10/8/2018 14:46

As a REIT the co is obliged to distribute its rental profits as a property income distribution. If net income rises the dividends will increase.

[skyship] 10/8/2018 12:22

SteMiS - I suspect unnecessarily cautious in view of the high dividend cover.

Also these facts:

# 2015: Divs = 36.0p....+6.7%
# 2016: Divs = 38.8p....+7.8%
# 2017: Divs = 41.0p....+5.7%
# 2018: Divs = 46.25p....+12.8%

I expect we'll see a Total anything between 52p-54p.

Only 7 & a bit months to wait on that result!!! (23rd March last year)

[stemis] 10/8/2018 11:04

The 15.4% increase in the interim dividend follows a 15.4% increase in last years final dividend so I'm assuming there won't be a similar increase in this years final dividend. Even if they increase it by say 2.5% to 30.75p, total dividend for the year would be up by 7% to 49.5p, which is more than acceptable.

[semper vigilans] 09/8/2018 07:57

They have always been conservative on NAV - would rather have it that way.
Good PID increase and sensible gearing.

[skyship] 09/8/2018 07:19

I was expecting a slightly better NAV performance; but not such a good hike up in the dividend.

So, all looks good and at 950p the discount = 20% and the prospective yield increases to 5.5% assuming a 34.25p final (+14%).

[stemis] 01/8/2018 13:59

Sorry, a bit late to this

Missed that £4.9m purchase of the Nuffield Health Fitness & Wellbeing Gym in the Broadway Plaza, Birmingham. 7% yield. Doesn't exactly shoot the lights out though, as what chance of asset management gains.

That's higher than the yield on our current portfolio which is about 6.4%. However since at 950p, the share price is an 18% discount to NAV, the effective yield to shareholders is about 8.5%.